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The following information was drawn from the accounting records of Wyckoff Company as of December 31, Year 2, before the temporary accounts had been closed. The Cash balance was $3,050, and Notes Payable amounted to $20,100. The company had revenues of $4,290 and expenses of $2,540. The company's Land account had an $5,000 balance. Dividends amounted to $200. There was $1,400 of common stock issued. Required a. Identify which accounts would be classified as permanent and which accounts would be classified as temporary. Classification Account Cash Notes payable Revenues Expenses Land Dividends Common stock Retained earnings b. Assuming that Wyckoff's beginning balance (as of January 1, Year 2) in the Retained Earnings account was $3,900, determine its balance after the temporary accounts were closed at the end of Year 2. Ending retained earnings c. What amount of net income would Wyckoff Company report on its Year 2 income statement? Net income Pizza Express Inc. began the Year 2 accounting period with $9,500 cash, $6,500 of common stock, and $3,000 of retained earnings. Pizza Express was affected by the following accounting events during Year 2: a. Purchased $12.500 of supplies on account. b. Earned and collected $20,000 of cash revenue. c. Paid $11,000 cash on accounts payable. d. Adjusted the records to reflect the use of supplies. A physical count indicated that $2,900 of supplies was still on hand on December 31, Year 2. Required a. Show the effects of the events on the financial statements using a horizontal statements model given below. In the Cash Flows column, use OA to designate operating activity, IA for investing activity, FA for financing activity, NC for net change in cash and NA to indicate accounts not affected by the event. The beginning balances have been recorded as an example. (Enter any decreases to account balances and cash outflows with a minus sign.) Assets Liabilities PIZZA EXPRESS INC. Effect of Events on Financial Statements for Year 2 Stockholders' Equity Common Retained Stock Revenue Earnings 6,500 + 3,000 Event Income Statement Expense Statement of Cash Flows Supplies Accounts Payable - Cash 9,500 Net Income Beg. Bal 1. 2. 3. Totals The following transactions pertain to the operations of Ewing Company for Yeart 1 Acquired $22.500 cash from the issue of common stock 2. Provided $18.800 of services on account 3. Pald $14.400 cash on accounts payable. 4. Performed services for $37,500 cash 5. Collected $5,150 cash from accounts receivable 6. Incurred $9.550 of operating expenses on account 7 Paid a $24100 cash for one year's rent in advance 8. Paid a $7.200 cash dividend to the stockholders. 9. Paid $2,400 cash for suppiles to be used in the future. 0. Recognized $32.700 of accrued salary expense. Required a. Classify the cash flows from these transactions as operating activities (OA). Investing activities (A), or financing activities (FA). Use NA for transactions that do not affect the statement of cash flows. Transaction Classification b. Prepare a statement of cash flows. (There is no beginning cash balance.) (Amounts to be deducted should be Indicated with a minus sign.) EWING COMPANY Statement of Cash Flows For the Year Ended December 31, Year 1 Cash flows from operating activities Net cash flow from operating activities Cash flows from investing activities Cash flows from financing activities Net cash flow from financing activities Net change in cash Ending cash balance The following events apply to Tracey's Restaurant for the Year 1 fiscal year. 1. Started the company when it acquired $21.000 cash from the issue of common stock 2. Purchased a new cooktop that cost $20,000 cash 3. Earned $34,000 in cash revenue. 4. Paid $18,000 cash for salaries expense. 5. Paid $7.200 cash for operating expenses. 6. Ad usted the records to reflect the use of the cooktop. The cooktop, purchased on January 1, Year has an expected useful life of four years and an estimated salvage value of $2.500. Use straight-ane depreciation. The adjusting entry was made as of December 31, Yeart Required a. Record the events in general ledger accounts under an accounting equation. (Negative amounts should be indicated by a minus sign.) TRACEY'S RESTAURANT Accounting Equation for Year 1 Assets = Stockholders' Equity Cash Cook Accum. - Com. Retained can Top Depr Stock Earnings Event 1. Issuesik 2. Pur. cook 3. Rev. 4. Paid sal 5. Paid op. x. 6. Depr. exp. Totals b. What amount of depreciation expense would Tracey's report on the Year 2 income statement? Depreciation expense c. What amount of accumulated depreciation would Tracey's report on the December 31, Year 2. balance sheet? Accumulated depreciation d. Would the cash flow from operating activities be affected by depreciation in Year 2? Required Record each of the following Fred Co. events in T-accounts: a. Received $18.500 cash by issuing common stock Common Stock Debit Credit Debit Credit b. Purchased supplies for $920 cash Cash Debit Credit Supplies Debit Credit c. Purchased land for $8.400 cash Cash Debit Credit Land Debit Credit d. Performed services for $4,100 cash. Service Revenue Debit Credit Debit Credit On December 31, Year 1, BIG Company had accrued salaries of $9.050. c-1. Determine the amount of net income BIG would report on the Year 1 income statement, assuming that BIG received $25,000 of cash revenue. Required a. Record in general journal format the adjustment required as of December 31, Year 1. if no entry is required for a transaction/event, select "No journal entry required in the first account field.) Net income View transaction list Journal entry worksheet c-2. What is the amount of net cash flow from operating activities for Year 1? Record the adjusting entry for salaries payable. Net cash flow from operating activities Note: Enter debits before credits. Date General Journal December Debit Credit d. What amount of salaries payable would BIG report on the December 31, Year 1, balance sheet? Salaries payable Record entry View general journal Clear entry b. Show the effect of above adlustment in a horizontal statements model. (Enter any decreases to account balances and cash outflows with a minus sign. In the Cash Flow column, use the initials OA to designate operating activity. IA for investing activity, FA for financing activity, NC for net change in cash, and NA for Not affected by the event.) BIG COMPANY Horizontal Statements Model for Year 1 Liabilities + Stockholders Income Statement Event Assets Equity Retained Statement of Cash Flows Salaries Payable - Revenue - Expenses - Income Net Earnings + Revenue - Expenses On December 31, Year 2, Morgan Company had the following normal account balances in its general ledger. Use this information to prepare a trial balance. Land Unearned revenue Dividends Prepaid rent Cash Salaries expense Accounts payable Common stock Operating expense Office supplies Advertising expense Retained earnings, Beginning Service revenue Accounts receivable $21,750 15,500 4,550 5,900 58,980 13,500 2,350 21,000 17,350 1,600 2,700 18,960 74,630 6, 110 MORGAN COMPANY Trial Balance December 31, Year 2 Account Titles Debit Credit Totals
